By Digital Currency Group (DCG) has opposed the bankruptcy plans of its subsidiary Genesis, arguing that it goes against the law and favors a small group of creditors.
In a Feb 5 court filing, the company asked the court not to approve the Revised Plan submitted by Genesis for multiple reasons, including violating the Bankruptcy Code as the lengthy process drags on.
According to the filing, DCG claims the plan will lead to Genesis overpaying its creditors by hundreds of millions more than the initial petition.
On its part, DCG states that it would support a plan that pays 100 cents on the dollar but in the absence of such, the debtors have devised a plan that pays some creditors more than the amount in the petition.
“DCG would support a plan that pays creditors one hundred cents to the dollar, and the Estates currently have sufficient assets to do so, but the debtors have not proposed such a plan.”
Particularly, the company alleges that the debtors alongside UCC and Ad Hoc Group want to pay unsecured creditors millions of dollars more, which favors a small controlling group over others urging the court to set it aside.
DCG Alleges Breach of Bankruptcy Code
Furthermore, the DCG’s legal representatives argued that the Revised Plan goes against two pillars of the Bankruptcy Code.
First, it states that senior classes may not receive more than the full value of their claims. Consequently, this filing comes with great disadvantages to some creditors, equity holders, and a lopsided set of principles.
Secondly, the distribution must comply with the absolute priority rule, which seems to be lacking from the plan.
“Certain creditors will be paid a premium, while equity holders receive nothing. Such a result is not fair and equitable to those creditors and equity holders whose rights are violated by the amended plan.”
In terms of the parent company rights, DCG claims that the proposed pan impedes its interests as the ultimate equity holder and strips it of economic and corporate governance rights. This represents a gross breach of fiduciary duties.
The firm stressed that the Amended Plan was borne out of a “Clandestine process,” which saw discussions between UCC and Ad Hoc Group with the exclusion of DCG against the rules to disenfranchise the equity interests.
DCG Reaches Preliminary Agreement with Genesis Creditors, Offering Potential 70%-90% Recovery#DCG has reached a preliminary agreement with #Genesis creditors to settle the claims by reimbursing 70-90% in USD equivalent to unsecured creditors.https://t.co/TMzauXpnB9
— Cryptonews.com (@cryptonews) August 29, 2023
Genesis filed for bankruptcy in 2023 following harsh market conditions the previous year, which also saw Terra Network and FTX collapse, wiping billions from the market.
On Feb 4, Genesis sought the court’s approval to sell assets worth $1.6 billion that included shares of Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust.
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